Starting a business can cost anywhere from a few hundred dollars to more than $500,000, depending on the business model. A solo service business may launch for approximately $500 to $5,000, while an online store may require $1,000 to $60,000. A retail store commonly needs tens of thousands of dollars, and a restaurant may require $125,000 to $550,000 or more. These are planning ranges, not universal averages.
For planning purposes, typical U.S. startup budgets look like this:
| Business Type | Approximate Launch Budget | Main Cost Drivers |
|---|---|---|
| Freelance or consulting business | $500 to $5,000 | Website, software, insurance, marketing |
| Home-based service business | $3,000 to $15,000 | Equipment, vehicle, insurance, licenses |
| Online store | $1,000 to $60,000 | Inventory, website, packaging, advertising |
| Product or manufacturing business | $5,000 to $1 million or more | Product development, inventory, machinery, facilities |
| Retail store | Around $48,000 or more | Rent, build-out, inventory, fixtures, staff |
| Restaurant | $125,000 to $550,000 or more | Lease, kitchen equipment, permits, remodeling, payroll |
The least expensive option is usually a home-based service business that uses skills or equipment you already have. Premises, employees, inventory and specialized equipment can increase the budget quickly.
What Does It Cost to Start a Small Business From Home?
A lean home-based business can often start for $500 to $5,000, depending on the equipment, licenses and professional services involved.
Common costs include:
- Business registration or DBA filing
- Website and domain name
- Computer, phone and other equipment
- Accounting and invoicing software
- Business insurance
- Professional licenses or local permits
- Initial advertising
- Legal or accounting advice
- Cash to cover expenses before customers pay
Examples include freelance writing, consulting, graphic design, virtual assistance, bookkeeping and some home-based cleaning or repair services.
The U.S. Small Business Administration groups businesses into three broad categories: brick-and-mortar businesses, online businesses and service providers. Each category has a different cost profile because premises, inventory and equipment affect the amount of capital required.
What Are the Basic Legal Costs?
Legal costs depend on your business structure, location and industry. The main expenses may include registration, licenses, permits and professional advice.
Business Registration
Registration fees depend on your state, business structure and location. An LLC or corporation generally requires a state filing fee. A sole proprietor operating under their legal name may not need to form a separate entity, although a DBA registration or local business license may still be required.
The SBA states that registration fees vary by state and business structure. License and permit fees also depend on the business activity and location.
Employer Identification Number
An Employer Identification Number, or EIN, is free when obtained directly from the Internal Revenue Service. The IRS warns that businesses do not need to pay a third-party website for an EIN.
An EIN is generally needed when a business has employees, operates as a partnership or corporation, or must pay certain employment, excise or other business taxes. A sole proprietor may also request one for banking or state tax purposes.
Licenses and Permits
Licenses and permits can cost anywhere from very little to several thousand dollars. The amount depends on:
- Your state, county and city
- Whether you operate from home or commercial premises
- Your industry
- Whether you sell regulated goods
- Whether you employ staff
- Whether you need health, construction, alcohol, transportation or professional licensing
Restaurants, contractors, childcare providers, salons, food businesses and transportation companies typically face more regulatory costs than online consultants or freelancers. The SBA recommends checking federal, state and local requirements before operating.
What Are the Biggest Startup Expenses?
The largest startup costs usually fall into these categories:
Equipment and technology Computers, tools, vehicles, machinery, point-of-sale systems and furniture.
Inventory and supplies Products for resale, raw materials, packaging, uniforms and consumable supplies.
Premises Rent, security deposits, renovations, signage, utilities and commercial insurance.
Professional services Legal advice, accounting, bookkeeping, design, consulting and tax preparation.
Marketing and sales Website development, branding, advertising, printed materials, photography and customer acquisition.
Insurance General liability, professional liability, commercial property, workers' compensation and industry-specific cover.
Staffing Recruiting, wages, payroll taxes, benefits, training and workers' compensation.
Working capital Cash to pay bills while sales are still developing.
The SBA recommends separating one-time costs from monthly expenses. Equipment, permits and initial branding are examples of one-time costs. Rent, wages, software, utilities, insurance and marketing are usually monthly expenses.
How Much Cash Should You Have Before Opening?
You need more than the cost of forming the company. A useful planning formula is:
Required startup cash = one-time costs + opening inventory or equipment + monthly operating costs until revenue becomes reliable
For example, a home-based consultant might budget:
| Expense | Example Budget |
|---|---|
| Registration or DBA | $0 to $300 |
| Website and domain | $100 to $1,000 |
| Software for the first three months | $100 to $600 |
| Insurance | Varies by business |
| Marketing and sales | $300 to $2,000 |
| Professional advice | $0 to $1,500 |
| Operating reserve | $1,000 to $5,000 |
| Illustrative total | $1,500 to $10,000 |
This is an illustrative planning example, not a required national budget. Insurance, licenses and equipment can make the total higher.
Budgeting only for the opening date is a common mistake. A business can be legally registered for a small fee and still need cash for rent, payroll, inventory and marketing before it reaches break-even. The SBA recommends calculating both startup expenses and the cash needed to cover early operating deficits.
What Is the Cheapest Business to Start?
The cheapest businesses are generally those that:
- Sell your existing skills
- Do not require inventory
- Do not require commercial premises
- Can operate with equipment you already own
- Can acquire customers through referrals or low-cost marketing
- Do not require employees at launch
Examples include:
- Freelance writing or design
- Consulting
- Virtual assistance
- Bookkeeping
- Online tutoring
- Social media management
- Home organization
- Some cleaning and maintenance services
A low-cost launch does not mean the business is free. You may still need insurance, permits, software, marketing and personal savings to cover living expenses while revenue develops.
Is an LLC More Expensive Than a Sole Proprietorship?
Yes, usually. A sole proprietorship may have no separate entity formation cost if you operate under your legal name and meet local requirements. An LLC normally requires a state filing fee and may involve annual reports, franchise taxes or registered-agent costs.
An LLC can provide liability protection and a separate legal structure, but it does not automatically make a business profitable or remove the need for insurance. The right structure depends on your risk, location, tax situation and plans for hiring or raising money.
State rules differ, so check your Secretary of State and local government websites before choosing a structure. The SBA notes that registration, naming and permit requirements vary by location.
Can Business Startup Costs Reduce Your Taxes?
Some qualifying startup and organizational costs may receive special tax treatment, but tax deductions do not reduce the cash you need upfront. The IRS states that certain businesses may elect to deduct up to $5,000 of qualifying startup costs and up to $5,000 of organizational costs, subject to applicable limits and rules. Other costs may need to be depreciated or amortized.
Keep receipts, separate business and personal spending, and ask a tax professional how the rules apply to your business structure.
The Practical Answer
Use the business model to set the first budget:
- A solo, home-based service business may need only a few thousand dollars, plus a personal emergency fund.
- An online store needs enough cash for inventory, packaging, website costs, advertising and early operating expenses.
- A physical retail, food or customer-facing business needs a much larger budget because rent, construction, equipment, inventory and payroll become major costs.
Before spending heavily, create two lists:
- Costs required to test the idea
- Costs required to operate at full scale
Start with the smallest version that can generate real customer feedback. This limits the money at risk and gives you better evidence before committing to inventory, employees or a long-term lease.